Nortel Networks sacks CEO and former CFO

28 Apr 2004

Nortel Networks, which is in the midst of an SEC investigation into earnings in 2000, 2001 and 2002 as well as the first two quarters of 2003, has sacked its CEO as well as a former chief financial officer and a former controller. The company further shocked markets by slashing its 2003 earnings in half because of the investigation.

In a statement this afternoon, the company said it has appointed William Owens as its new CEO and president, replacing Frank Dunn who was terminated “for cause.” The company also appointed William Kerr as new chief financial officer and MaryAnne Pahapill as permanently as controller.

Former chief financial officer, Douglas Beatty, and former controller, Michael Gollogly, both of whom had been placed on paid leave of absence by Nortel Networks on March 15, 2004, have been terminated for cause. As well as this, at least four other senior finance managers at Nortel have been put on paid leave pending further progress of its audit.

In a statement this afternoon, Nortel said that it would take a cut of around 50pc in its previously announced profits for 2003; would restate its financial results for 2001 and 2002 and delay the release of its first quarter report for 2004 following a review by its audit committee. Nortel recorded a net loss of US$27.3bn for 2001 after the telecoms spending bubble burst the preceding year and has been struggling ever since. However, it reported a net profit of US$732m for 2003, a figure that will now be halved.

“The board of directors believes that the actions announced today are about accountability for our financial reporting and are in the best interests of the company and all of its stakeholders, including our investors, customers and employees,” said Lynton Wilson, chairman of the board, Nortel Networks. “These actions are an important step in the process of restoring confidence in the Company’s leadership and financial reporting.”

By John Kennedy